The impact of export VAT rebates on firm productivity: Evidence from China

This paper studies the impact of export VAT rebates on firm productivity with Chinese firm-product-level data. We find that higher VAT rebates significantly raise firm productivity. The results are robust to various estimations of firm productivity. Moreover, this paper finds that the impact of export VAT rebates on firm productivity is significantly different across firms and sectors. More specifically, our results suggest that the impact is mainly driven by firms with small export intensive margins and large export extensive margins, new exporters, financially constrained firms and low-productivity firms. Furthermore, in high-tech sectors, the impact is significantly large with a one percentage point increase of the firm rate of VAT rebates nearly raising firm productivity by 6%.